New to BitCoin and have concerns

[Lord T]

Hi there,

A while ago I came across Bitcoin and didn't really understand it. After some recent articles on the web I decided to have another look and seen a much more vibrant market so I decided to get involved.

The main reason I got involved was the fact that there was no central control. Finally, free from government meddling. However after reading about the handling of the recent hack and the theft of Bitcoins I'm now not seeing any difference between Bitcoins and tangible goods.

I'm not concerned about the hack and I'm not concerned about the theft both of those can be handled, There will always be weak points in security and even experienced IT people get hacked. Where money is involved it makes it more attractive. People should lose trust in the people who were hacked because they clearly were not looking after the system correctly.

The part that concerns me is the rollbacks and the adjustment of the Bitcoin value. This was purely to regain trust in their system and make them look good. This is no different from Government meddling in my book. Adjusting the price of Bitcoins, This means they could drop the price, buy Bitcoins then make it artificially high and sell them. This sound like control to me and I don't remember reading about this feature in the specifications. In addition did this rollback rollback other transactions not related to the theft?

I though Bitcoin was a way to avoid control and meddling. I'm not convinced it can work now which is a pity.

Or do I have the wrong take on the handling of this 'bank job'?

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[Seraphim401]

Hi there,

A while ago I came across Bitcoin and didn't really understand it. After some recent articles on the web I decided to have another look and seen a much more vibrant market so I decided to get involved.

The main reason I got involved was the fact that there was no central control. Finally, free from government meddling. However after reading about the handling of the recent hack and the theft of Bitcoins I'm now not seeing any difference between Bitcoins and tangible goods.

I'm not concerned about the hack and I'm not concerned about the theft both of those can be handled, There will always be weak points in security and even experienced IT people get hacked. Where money is involved it makes it more attractive. People should lose trust in the people who were hacked because they clearly were not looking after the system correctly.

The part that concerns me is the rollbacks and the adjustment of the Bitcoin value. This was purely to regain trust in their system and make them look good. This is no different from Government meddling in my book. Adjusting the price of Bitcoins, This means they could drop the price, buy Bitcoins then make it artificially high and sell them. This sound like control to me and I don't remember reading about this feature in the specifications. In addition did this rollback rollback other transactions not related to the theft?

I though Bitcoin was a way to avoid control and meddling. I'm not convinced it can work now which is a pity.

Or do I have the wrong take on the handling of this 'bank job'?

As I see it Bitcoin is still in beta, witch means their going to be some nasty things to put up with.
 I long for the day when I can go to my local HW shop and pay with BTC.Then I can say fuck you to all exchanges.

[Alex Beckenham]

I though Bitcoin was a way to avoid control and meddling. I'm not convinced it can work now which is a pity.

Or do I have the wrong take on the handling of this 'bank job'?

Wrong take.

Bitcoin transactions cannot be rolled back.

What you are talking about is ONE bitcoin exchange, and even then, they didn't 'adjust bitcoin prices'. They simply removed some of the trades that occurred during an intrusion into their database. After that, bitcoin prices were subject to market forces as usual.

[nix930]

I recently created accounts with Dwolla and bitmarket.eu.  I was excited to purchase 8 bitcoins. Moments after the purchase transaction was completed, an unauthorized withdrawal transaction was posted to my account that drained my account to a 0 balance!

I notified bitmarket.eu and am awaiting a reply.

I suspected keylogging, so I scanned & cleaned my computer using ComboFix, Malwarebytes and ESET NOD32.  I then changed all my passwords and made another purchase transaction.  Moments after the BTC were deposited into my account, I watched another unauthorized withdrawal transaction post that drained my account to a 0 balance!

Any insight will be greatly appreciated.

[dazedtrader]

Bitcoin transactions cannot be rolled back.

What you are talking about is ONE bitcoin exchange, and even then, they didn't 'adjust bitcoin prices'. They simply removed some of the trades that occurred during an intrusion into their database. After that, bitcoin prices were subject to market forces as usual.

Exactly. Because of the decentralized nature of Bitcoin, a mass rollback is not possible. I think the 'flash crash' has been misrepresented in various articles in the media - people don't realize that it only affected internal transactions on one exchange.

[nix930]

I recently created accounts with Dwolla and bitmarket.eu.  I was excited to purchase 8 bitcoins. Moments after the purchase transaction was completed, an unauthorized withdrawal transaction was posted to my account that drained my account to a 0 balance!

I notified bitmarket.eu and am awaiting a reply.

I suspected keylogging, so I scanned & cleaned my computer using ComboFix, Malwarebytes and ESET NOD32.  I then changed all my passwords and made another purchase transaction.  Moments after the BTC were deposited into my account, I watched another unauthorized withdrawal transaction post that drained my account to a 0 balance!

Any insight will be greatly appreciated.

bump

[dazedtrader]

nix930 - that does sound pretty bad. Why don't you create a new thread with an appropriate title and you might get some more responses?

[kokjo]

Hi there,

A while ago I came across Bitcoin and didn't really understand it. After some recent articles on the web I decided to have another look and seen a much more vibrant market so I decided to get involved.

The main reason I got involved was the fact that there was no central control. Finally, free from government meddling. However after reading about the handling of the recent hack and the theft of Bitcoins I'm now not seeing any difference between Bitcoins and tangible goods.

I'm not concerned about the hack and I'm not concerned about the theft both of those can be handled, There will always be weak points in security and even experienced IT people get hacked. Where money is involved it makes it more attractive. People should lose trust in the people who were hacked because they clearly were not looking after the system correctly.

The part that concerns me is the rollbacks and the adjustment of the Bitcoin value. This was purely to regain trust in their system and make them look good. This is no different from Government meddling in my book. Adjusting the price of Bitcoins, This means they could drop the price, buy Bitcoins then make it artificially high and sell them. This sound like control to me and I don't remember reading about this feature in the specifications. In addition did this rollback rollback other transactions not related to the theft?

I though Bitcoin was a way to avoid control and meddling. I'm not convinced it can work now which is a pity.

Or do I have the wrong take on the handling of this 'bank job'?

when you transfer your coins to an exchange the can do with them what they like, its your choice.
they can't touch your bitcoin if they are in your privat wallet on your computer.
the rollback was mtgox's decision, and they are right to do it, its after all thier exchange.

if you don't like them, you can take your coins, and leave mtgox.

no one is controlling you or your money, only yourself.

[realnowhereman]

The part that concerns me is the rollbacks and the adjustment of the Bitcoin value. This was purely to regain trust in their system and make them look good. This is no different from Government meddling in my book. Adjusting the price of Bitcoins, This means they could drop the price, buy Bitcoins then make it artificially high and sell them. This sound like control to me and I don't remember reading about this feature in the specifications. In addition did this rollback rollback other transactions not related to the theft?

I though Bitcoin was a way to avoid control and meddling. I'm not convinced it can work now which is a pity.

Or do I have the wrong take on the handling of this 'bank job'?

I think you do, yes.

1) The rollback was a rollback of trades that had been performed using a hacked account.  Imagine you had $500,000 in your current account; someone hacks it and spends it all.  It wouldn't be unreasonable for the bank to rollback those transactions.

2) Mt.Gox the exchange is not Bitcoin.  It is merely one service that uses bitcoins.  An exchange.  In fact, Mt.Gox makes very little use of Bitcoins other than to transfer them in and out of its own centralised, authority-bound world.  Just like putting money in a bank; the bank can do what they like.

3) If the hacker had been able to transfer the huge number of coins straight out using the Bitcoin system itself rather than just Mt.Gox; those coins would be gone.  There are no rollbacks with bitcoin.  There was another theft a few days before, were some poor soul lost $250,000 thanks to a break in on their desktop computer (and some bad choices).  That money is gone and won't be coming back.  No rollbacks.

4) The price crash was caused by the hacker selling off massive quantities of bitcoins, utterly flooding the market.  Every outstanding offer to buy bitcoins was met, even the crazy, opportunistic ones offering $0.01 for a bitcoin.  Here's what's interesting though: even in those extraordinary circumstances, with a massive sell off, the price of bitcoins was rebounding even as Mt.Gox was shut down.  It had reached around $13 before they pulled the plug.  That tells us that the market had decided on a price, and even with huge (stolen) resources, that price can't be manipulated.

5) The rollback, as you can imagine, annoyed those people who thought they had just made the deal of the century and bought hundreds of thousands of dollars worth of Bitcoins for pennies.  They were, in essence, complaining that they didn't get to keep stolen goods.  You can take your own view on whether they or Mt.Gox were right.  It's still nothing to do with the Bitcoin system itself.

6) Don't confuse Mt.Gox with the Bitcoin system.  If anything, the Mt.Gox hack is a textbook example of the danger of centralised systems.  Bitcoin is not centralised.  Compare the hack with the recent Citibank theft -- it told us something about Mt.Gox; not about Bitcoins; just as the Citibank told us something about Citibank, not about dollars.

[Lord T]

Guys,

Thanks for that. From the articles it was not made clear it was on only just one exchange. The text from the website http://blogs.computerworld.com/18504/can_geeks_save_bitcoin_after_hellish_week_of_hack_heist_trojan_and_a_crash was;

The value of the virtual money crashed from $17.50 per bitcoin to almost nill - mere pennies. MtGox was shut down before operators rolled back the fraudulent transactions and restored bitcoin value to $17.50.

So my concerns were;
How did they manage to 'rollback fraudulent transactions' when they went outside the exchange or were those not?
'restored bitcoin value to $17.50' sounds a bit like manipulation to me.

Thank you realnowhereman for explaining the story a zillion times better than the hacks at that web site.

It makes a bit difference to people and they need to understand it.

I'll still be keeping away from Mt.Gox as much as possible anyway for having such mickey mouse security for what is in reality a bank.

I feel much better now about the whole thing.

Regards

[kokjo]

How did they manage to 'rollback fraudulent transactions' when they went outside the exchange or were those not?

they did not, people how did cashout at the crash, did get a negative balance, and mtgox absorbed the lost btc.
they can absorb great losses, becuase they have a lot btc, because of the 0.65% fee.

'restored bitcoin value to $17.50' sounds a bit like manipulation to me.

they did not restore the bitcoin value. they disabled trading for 24 hours, but did allow to place bids below 17.50 and asks above 17.50.
then they resumed trading, and the price jumped to 14.00. then the price went up and down, a few times.

[Not Drinking The Kool-Aid]

Yes, all the fanboys who have responded so far have correctly described what happened at Mt. Gox.

The one thing they neglected to mention is that there's no reason why "early adopters" of BitCoin (read: first in to the pyramid scheme / pump and dump) can't start selling their coin en masse and crash prices everywhere.

The market is very shallow, and a determined seller wouldn't need much to do this.

So: don't drink the Kool Aid. Think twice about how much money you want to "invest" in BitCoin. If you "believe" in it (I could say you're already lost when you have to start talking about faith) then consider converting $ to BTC when you need to spend them; and for whatever your actual business purposes may be.

Speculators are going to get their asses handed to them on a platter with bit coin, in my opinion. So. If you're a bitcoin billionaire (in dollar terms) later, please come back and laugh at me. And if you lose your money, don't bother. But don't say nobody warned you...

[kokjo]

Yes, all the fanboys who have responded so far have correctly described what happened at Mt. Gox.

The one thing they neglected to mention is that there's no reason why "early adopters" of BitCoin (read: first in to the pyramid scheme / pump and dump) can't start selling their coin en masse and crash prices everywhere.

true, but when they does that, other people will get nearly free bitcoin.
and after a few month to a year, the price will rise again.

early adopters only have a limit amount of bitcoin. and not even half of the coins are release yet.

[kparcell]

Can anyone name one nation that has declared this type of exchange system either legal or illegal?

In the US, there are laws defining money and regulating its use.  Bitcoin is a money there by definition if it is used as money (almost anything can be used as money), but it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.

Bitcom neglects obvious questions in its FAQ section, such as "What is the value of a bitcoin?" (and "Where are bitcoins illegal?", etc,) and thus it can not legally be used as money in the US.

So, I'm interested in collecting useful data on these issues, beginning with a list of nations that have declared bitcoins legal or illegal.

Anyone?  Is there an existing list?

[nookngood]

Yes, all the fanboys who have responded so far have correctly described what happened at Mt. Gox.

The one thing they neglected to mention is that there's no reason why "early adopters" of BitCoin (read: first in to the pyramid scheme / pump and dump) can't start selling their coin en masse and crash prices everywhere.

true, but when they does that, other people will get nearly free bitcoin.
and after a few month to a year, the price will rise again.

early adopters only have a limit amount of bitcoin. and not even half of the coins are release yet.

I do agree that as time goes on early adopters will lose overall influence in the btc market, although they will still have a high influence compared to the average user.  However, as time goes on we may be considered early adopters. 

[julz]

The part that concerns me is the rollbacks...

It was the right thing to do. Invalid trades due to glitches/fraud are cancelled on normal exchanges too. Happened on the Nasdaq this year.

and the adjustment of the Bitcoin value.

What 'adjustment'?  The mtgox price is a function of what bids and asks people have placed. Do you have evidence that it's otherwise?